Are Any Group Health Plans Exempt From the Federal Mental Health Parity?

Are Any Group Health Plans Exempt From the Federal Mental Health Parity?

QUESTION: We are wondering if our company’s medical plan might qualify for an exemption from the federal mental health parity requirements. What exemptions are available?

ANSWER: The federal mental health parity requirements apply to most employer-sponsored group health plans, but there are a few exceptions. As a reminder, the mental health parity rules under the Mental Health Parity Act (MHPA) and the Mental Health Parity and Addiction Equity Act (MHPAEA) require parity between medical/surgical benefits and mental health or substance use disorder benefits in the application of annual and lifetime dollar limits, financial requirements (such as deductibles, copayments, coinsurance, and out-of-pocket maximums), quantitative treatment limitations (such as number of treatments, visits, or days of coverage), and nonquantitative treatment limitations (such as medical management standards). However, some exceptions apply:

  • Small Employer and Small Plan Exemptions. An exception is available for small employers that employed an average of at least two (one in the case of an employer residing in a state that permits small groups to include a single individual) but no more than 50 employees (100 or fewer employees for certain non-federal governmental plans) on business days during the preceding calendar year. When determining whether an employer qualifies as a small employer, certain related employers (including members of a controlled group or an affiliated service group) are treated as one employer. An employer not in existence throughout the preceding calendar year will determine whether it is a small employer based on the average number of employees that it reasonably expects to employ on business days during the current calendar year. There is also an exception for plans with fewer than two participants who were current employees on the first day of the plan year (including retiree-only plans). Note that if an employer provides coverage through a group policy purchased in the small group insurance market, that group policy will be required to cover mental health and substance use disorder services in a manner that complies with the mental health parity requirements.
  • Increased Cost Exemption. An increased cost exemption is available for plans that make changes to comply with the mental health parity rules and incur an increased cost of at least 2% in the first year that the MHPAEA applies to the plan (generally, the first plan year beginning on or after October 3, 2009, unless a later date applies, e.g., because the plan ceased to qualify for an exemption) or at least 1% in any subsequent plan year. Plans that comply with the parity requirements for one full plan year and satisfy the conditions for the increased cost exemption are exempt from the parity requirements for the following plan year (i.e., the exemption lasts for one plan year). After that year ends, the plan must again comply with the parity requirements for a full year before it may (potentially) qualify for the exemption again. Given the complexity of administering coverage with an every-other-year exemption, use of the increased cost exemption may be impractical.
  • Excepted Benefits. The federal mental health parity requirements do not apply to group health plans that provide only excepted benefits (e.g., certain limited-scope dental or vision plans and most health FSAs).

Self-insured non-federal governmental plans could previously opt out of the requirements, but the Consolidated Appropriations Act, 2023 eliminated that right as of December 29, 2022. No new mental health parity opt-out elections may be made on or after that date and opt-out elections expiring on or after June 27, 2023, may not be renewed. 

Source: Thomson Reuters

Are Any Group Health Plans Exempt From the Federal Mental Health Parity?

Is the HSA Contribution Limit an Annual or Monthly Limit?

QUESTION: How does the general contribution limit for HSAs work? It is often stated as an annual limit, but isn’t it really monthly? Our company is thinking about changing to HDHP coverage that would allow our employees to make HSA contributions. If we decide to facilitate those HSA contributions or to make employer contributions, would we need to limit the amount of contributions made each month, or only annually?

ANSWER: The general contribution limit for HSAs is an annual limit determined by the number of months of HSA eligibility. The HSA of an individual who is HSA-eligible for the entire year can receive contributions (from any source) up to the full annual limit. If an individual is only HSA-eligible for a portion of the year, the annual limit is prorated based on the number of months of HSA eligibility. A special rule that can change this outcome is noted below.

For example, if Ana, a 40-year-old calendar-year taxpayer, is HSA-eligible for all of 2023 and has self-only HDHP coverage, her HSA can receive contributions of up to the maximum of $3,850 for 2023. (For coverage other than self-only coverage, the maximum for 2023 is $7,750.) If Ana were only HSA-eligible for April through September, however, her annual limit would be 6/12ths of the full annual limit, or $1,925. That $1,925 could be contributed in one month, or in any number of payments made on or after January 1, 2023, and on or before the filing due date (without extensions) for Ana’s 2023 federal tax return. Some or all of the permitted amount could be contributed during a month in which Ana is not HSA-eligible, based on her prior or anticipated months of HSA eligibility. (Of course, contributions could not be made until Ana’s HSA is established, if it wasn’t established by January 1st.) A similar proration rule applies to HSA catch-up contributions, which increase the general contribution limit for HSA-eligible individuals who have attained age 55 by the end of the taxable year. Thus, if Ana were at least age 55 by the end of 2023, and she were HSA-eligible for the entire year, her limit would be increased by $1,000. But if she were HSA-eligible for only 6 months of 2023, her catch-up contribution limit would be only $500.

Employers that facilitate employee contributions or make their own contributions to employees’ HSAs need not limit the amount actually contributed in each month, but they do have to track their employees’ HSA eligibility on a monthly basis so they can determine any prorated limit amount. Employers are only responsible for knowing how their own benefit programs affect HSA eligibility and whether an employee is eligible for catch-up contributions. They need not determine whether employees have disqualifying coverage from other sources or how much has been contributed to employees’ HSAs by other means.

As noted above, special contribution rules can apply when determining a particular employee’s limit. One of these is the “full contribution rule,” which allows calendar-year taxpayers to be treated as HSA-eligible for the entire year if they are HSA-eligible on December 1st, subject to certain conditions that include remaining HSA-eligible for at least a 13-month testing period. There is also a special rule for married individuals if either spouse has family HDHP coverage.

Source: Thomson Reuters

Are Any Group Health Plans Exempt From the Federal Mental Health Parity?

Agency RFI Focuses on No-Cost Coverage of OTC Preventive Products Without a Prescription

A DOL, HHS, and IRS request for information (RFI) is seeking input about how the preventive health services mandate applies to over-the-counter (OTC) preventive items and services, including the potential benefits and costs of requiring plans and insurers to cover these items at no cost without a provider’s prescription. Agency guidance has previously advised that OTC items and services generally must be covered without cost-sharing only when prescribed by a provider.

The RFI seeks information on current access to and utilization of OTC preventive products, as well as operational challenges for plans, insurers, third-party administrators, and pharmacy benefit managers. For instance, the request asks about operational challenges that may be associated with using telepharmacies and mail orders within and across states or localities. The agencies are also interested in “lessons learned” from providing coverage for OTC COVID-19 diagnostic tests during the COVID-19 public health emergency. The RFI explains that the agencies are particularly focused on OTC preventive care items that can be purchased without a prescription now or in the future, such as contraceptives, tobacco-cessation products, folic acid during pregnancy, and breastfeeding supplies.

Click here for the full request.

Source: Thomson Reuters

Are Any Group Health Plans Exempt From the Federal Mental Health Parity?

When Is a Qualified Beneficiary Considered “Entitled to Medicare” for Purposes of Terminating COBRA Coverage Early?

QUESTION: We understand that our group health plan can terminate COBRA coverage early if a qualified beneficiary becomes entitled to Medicare after electing COBRA. What does it mean to be “entitled” to Medicare?

ANSWER: When qualified beneficiaries (including covered employees) first become entitled to Medicare after electing COBRA coverage, their COBRA coverage can be terminated early—before the end of the maximum coverage period. For this purpose, the Medicare terms “eligibility” and “entitlement” are not synonymous, and it is important to understand the difference. “Entitlement” means that an individual who is eligible for Medicare has actually enrolled in Medicare and may currently receive benefits. An individual who must take additional steps to enroll in Medicare before receiving benefits is not yet “entitled” to Medicare for purposes of the COBRA rules.

Individuals who become eligible for Medicare Part A (hospital insurance) based on age, disability, or end-stage renal disease (ESRD) must apply to become entitled to Part A coverage in many cases, but entitlement is automatic for individuals who have already applied for and are receiving Social Security or Railroad Retirement Act benefits. Individuals become entitled to Medicare Part B (physicians’ services and other health expenses) either automatically when they become entitled to Part A, or later during specified enrollment periods.

Although group health plans are allowed to terminate a qualified beneficiary’s COBRA coverage early upon Medicare entitlement, it is important to remember that the COBRA rights of other qualified beneficiaries in the family unit who are not entitled to Medicare are not affected. For example, the plan could not terminate the COBRA coverage of the spouse and dependent children of a Medicare-entitled former employee.

Source: Thomson Reuters

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